Scottish Widows Bank has launched a new mortgage product for endowment holders concerned their policies may have a shortfall.
‘Endowment Solution’ offers endowment holders the opportunity to remortgage onto a flexible mortgage that enables them to match mortgage payments to their personal needs. For example, customers can split repayment methods to create a part repayment, part interest-only mortgage. As with all Scottish Widows Bank mortgages the standard variable rate is at least 0.5% below those of high street lenders
Commenting on the announcement, Murdo McHardy, senior business development manager at Scottish Widows Bank said: “This is a possible solution for policyholders whose endowment may not reach its target and pay off their mortgage.
“Take someone with a £100,000 mortgage and predicted £10,000 shortfall on their endowment. If they transferred to this deal they could put £90,000 on interest-only and the £10,000 shortfall on a repayment basis. They move onto a lower variable rate and pay less in monthly payments than they did with their previous lender.”
As the deal has a lower rate, borrowers can effectively make overpayments each month without increasing their monthly outlay. This will reduce capital and make interest savings and the lender says that in some cases this may be sufficient to eliminate the potential shortfall.
The mortgage currently carries the additional incentive of 1% off the SVR for 12 months and the lender will also cover any valuation fees.
McHardy added: “We are aware that there is a problem in the industry with endowments, and we want to say to advisers – here is a possible solution. It can reduce the monthly payment and address the endowment’s shortfall.”